What should Gordon do now?

The following draft would be suitable for a brave Labour adviser to send to our Prime Minister at bay:

To Prime Minister
From Senior Political Adviser

When I last wrote to you I praised your early statements in favour of strengthening our democracy and listening to the public more. I recommended that you honoured the Labour promise to hold a referendum on the EU Lisbon Treaty, to signal that you had a different view from your predecessor, more in tune with the British people. You did not like that advice, and turned to others to steer you. I kept out of your way in the run up to the May elections, as I thought it important to let the other advisers have a clear run to give their approach a good test. The polling still shows that 80% of the public do want a referendum, and think you should honour the promise. It has become an issue of trust.

Unfortunately the approach your other advisers urged you to follow has not worked. The Conservatives outpolled us by 20% in the Council contests, and Boris Johnson beat Ken by 6% in the crucial London seats. Let me explain what I think has gone wrong and what could be done to recover from here.

The political strategy has been based on hammering the Conservatives for any apparent mistake in what they say, and for not saying enough about the detail of what they would do. In particular it has been Treasury driven, seeking to cost any aspiration they express, and seeking to show their “numbers do not add up”. This old fashioned approach has not worked, because our own numbers visibly do not add up, and because we are the government responsible for handling the economy. You may remember we got away with supporting the Exchange Rate Mechanism which did so much damage to the Conservatives, because the public rightly blamed the government which actually took them in. They did not concern themselves with the advice we offered from Opposition. I am afraid it is not about the Conservatives at the moment – it is about the government and the problems we need to confront. We can turn to attack the Opposition later, once we have dealt with the real economic and social problems we face.

This political strategy has been buttressed by seeking to send messages about what we stand for, that are not backed up by solid evidence that we can implement them. Your last budget sought to send the message that we are tax cutters, but of course there was insufficient money available, so you had to double the 10p tax to 20p. You sought to send the message that you will be tough on terrorism and crime –unlike the Conservatives – but it has come across that you are taking away important liberties from law abiding people. You have made the Conservatives look moderate and sensible through putting so much political capital behind 42 day detention without charge. You have repeated the message that you are a serious and competent person with your head down dealing with difficult government issues, yet the last few months have been punctuated by error after error in handling data, dealing with backbenchers and implementing policy.

Nor has it helped that the Spin Doctors appointed by your office have become the news themselves, drawing attention to the high salary bill by warring in public when they should be supporting you to the hilt and creating a united front within your office.

The public are worried. They feel under intense financial pressure, as you know, thanks to rising food and energy bills, mortgage difficulties, falling house prices and the Income and Council Tax changes. Not all of these things are under our control. There is no quick fix for rising energy prices, other than a fortuitous change in world energy prices. We are still years away from new power stations in the UK thanks to the delays in settlign the nuclear issue. Food prices could be brought down if we could reform the CAP, but there is no immediate prospect of that as the French President made clear on his visit.

However, some of them are under our control. Part of the reason fuel prices have gone up so much is the tax rises as the pump price rises. You could say you intend to raise just the amount of money from petrol and diesel that you stated in the Budget, which would allow you to cut the fuel tax rate at the pump. It could be used to show people you do not want to continuously clobber motorists, and to remind them that the revenue you did say you would raise is an important part of the national budget.

You could look again at the 10p band and the reduction of the standard rate to 20p. You could reaffirm the importance of getting Income Tax down to 20 p, phase it over the next couple of years, and phase in a larger tax free allowance to help the lower earners who are otherwise losing out.

You could play politics with the Council Tax, now that most Councils are either under Conservative control or No Overall Control, and remind people that local decisions are important in settling its level.

In order to direct more cash into people’s pockets and purses – which is what they want – you are going to have to go back to Prudence, and make more progress in controlling public spending. I was talking the other day to a large company that already handles some contracted out business for us. They confirmed that they could take on more or less any administrative function from within government, and offer to do it for 15-40% less than it costs the government at the moment. They would also offer jobs to all the staff involved in the function, as they could redeploy the ones they did not need as they made the process more efficient. I appreciate that this is not popular with the Unions, but there are no easy options from here. This one combines job guarantees, with preserving government functions, and delivers less cost to give us more scope on taxes.

You could look at the huge costs of computerisation in Whitehall, and slow it all down for a couple of years, to save money without having to announce any major climbdown. You could ask for a reduction in the spending on consultancies and reorganisations and put in controls over new recruitment of staff.

I know you think the problem is largely created by rebel backbenchers and disloyal people within the Labour movement. The rebels will not see it that way. They feel they are going to lose their seats unless there is a change of direction. I would urge you to consider each of their causes on their merits, and not through the prism of loyalty glasses. Is it really worth it to have a further bruising row with them over 42 day detention without charge? Couldn’t the Security Services or the Police produce new advice saying that it might not be so important after all? Isn’t it crucial to come up with a better answer on the 10p Tax Band before it returns to the Commons?

You are understandably concerned about the state of the housing market. It is too late to stop further declines in house prices, and it is going to take time for the mortgage market to pick up again. If you really do want more money to be available for mortgages then you have to tell the Regulators to back off a bit – they are busily demanding that banks hold more cash for any amount of advance, and telling banks not to lend to anyone who might be stretched by the loan.

The business community is very bruised by the abolition of the 10% Capital Gains Tax rate and the more aggressive approach to business tax in general. There need to be some tweaks and changes to send the signal that the government is not anti enterprise.

If you did offer a referendum on the EU Treaty it would pleasantly surprise the voters and the commentariat. The government should be neutral, allowing pro and anti organisations to emerge to run the debate. If the electorate then voted down the Treaty the government would not be in an impossible position, and could stage a popular demand for renegotiation with our EU partners in the run up to the General Election. I realise that this is likely to be a bridge too far for you , but it might make you think the other ideas in this memo are not so bad after all!